Fox-Disney Sports Service Blocked by Judge in Win for Fubo
(Bloomberg) -- Fox Corp., Warner Bros. Discovery Inc. and Walt Disney Co. were blocked by a judge from launching their streaming sports service one week before its rollout, taking a blow from their smaller rival FuboTV Inc.
US District Judge Margaret Garnett on Friday issued a preliminary injunction blocking the $42.99-a-month service, Venu Sports, from going forward while Fubo’s lawsuit against the three companies proceeds.
The three companies “exercise near-monopolistic control over the ability for a different live-sports-only streaming service to exist and compete with” them, Garnett wrote in her ruling.
The ruling in Manhattan is a victory for Fubo, which argues that the new venture — set to start Aug. 23 — would prevent competitors from offering a similar “skinny bundle” of sports channels and raise prices for consumers. Fubo says its business would be destroyed if subscribers flee to Venu.
The judge sided with Fubo, saying that once the proposed streaming service launches, they will “have no reason to take actions that could allow for the emergence of direct competitors.”
Fubo shares surged as much as 22% on Friday, their biggest intraday gain in more than a year. Still, the stock has been on a steady decline since January, losing more than 50% of its value.
A spokesperson for the three companies said they will appeal.
“We believe that Fubo’s arguments are wrong on the facts and the law,” the spokesperson said. “Venu Sports is a pro-competitive option that aims to enhance consumer choice by reaching a segment of viewers who currently are not served by existing subscription options.”
Fubo called the ruling a “victory” and said it will move forward with its lawsuit against the three companies.
“A fair and competitive marketplace is necessary to provide consumers with multiple, robust and more affordable sports streaming options,” David Gandler, co-founder and CEO of Fubo, said.
Losing Users
The new service comes as more and more viewers have jettisoned increasingly costly cable and satellite TV packages in favor of lower-priced alternatives.
The pay TV industry lost almost 30 million users from 2015 to 2023 and could shed another 6 million by the end of the year, according to a report on Venu by Bloomberg Intelligence. Industry leader ESPN, controlled by Disney, has seen its subscriber count fall to 71 million last year from 100 million in 2010.
Fubo sued Fox, Warner and Disney in February, right after they announced they were joining forces to launch Venu. The company argued the trio was using their control of valuable rights to major sporting events to assert control over the market. Fubo claimed they were forcing rivals to license and distribute a big bundle of less popular general entertainment channels if they wanted to carry networks such as ESPN and Fox.
Garnett ruled after more than a dozen witnesses testified at a weeklong hearing, including Fubo CEO David Gandler, who told the judge he expects “the floodgates will open” once the new service starts operating and that subscribers will abandon Fubo.
“Consumers will pay the price, through higher costs, less competition and lower choice,” Joshua Hafenbrack, a lawyer for Fubo, said during the hearing.
Robbing Viewers
The three companies argued that what would reduce competition is blocking the new service, by robbing viewers of lower-cost options for watching games and limiting innovation in the marketplace.
Fox, Warner and Disney argue that the joint venture doesn’t stop the individual companies from licensing their sports rights to those outside of Venu or from offering them directly to consumers, and that Fubo is a “weak competitor” that “adds little value to the TV ecosystem.”
Meanwhile, the US Justice Department has plans to scrutinize the new platform over concerns it could harm consumers, media rivals and sports leagues.
Fubo’s lawsuit is one of a number of legal battles being fought over the lucrative rights to athletic contests amid a shifting industry landscape.
Warner Bros. recently lost out on media rights to National Basketball Association games and is suing the league following a $76 billion deal between the NBA, Disney, Comcast Corp. and Amazon.com Inc. And a federal judge in Los Angeles recently tossed out a $4.7 billion verdict against the NFL in a fight over pricing of Sunday Ticket.
The case is FuboTV Inc. v. Walt Disney Co. et al., 24-cv-1363, US District Court, Southern District of New York (Manhattan).
--With assistance from Christopher Palmeri, Bob Van Voris and Matt Turner.
(Updates with comment from Fubo in paragraph nine.)
©2024 Bloomberg L.P.
